Too many companies have gotten used to the idea of using “other people’s money” to do business. And though the thought of funding might sound appealing, there is such a thing as too much help.
When you consider looking for investors, make sure you don’t risk losing control of your business. Bringing an investor on board means giving up a percentage of your business, which could also mean cutting into your already small profits or growing more quickly than you can handle.
The better kind of growth is one that is slow, profitable and under your control. Furthermore, bringing in outside capital also means having to rewrite your business plan, which can cause you to lose focus as well as control.
Being at a disadvantage and having few resources is actually a proven a recipe for success. In fact, immigrants to the United States are twice as likely as US citizens to start their own business.
Rocky Aoki came to the United States from Japan in the 1960s, and in order to pay for his restaurant management classes, he rented an ice cream truck that he drove around New York City. He eventually saved up $10,000, which helped convince his father to invest in his restaurant, which went on to become the popular Japanese restaurant chain, Benihana.
Rocky wanted his son, electronic dance musician Steve Aoki, to find his own success without relying on Rocky’s money. So, when Steve was 19 years old, he used the $400 he had to help start a music label by the name of Dim Mak Records with his friends. Their office was his apartment, which was regularly packed with up to 13 interns.
Steve and his friends would self-produce a seven-inch single and sell it out of the back of their car after Steve’s DJ gigs until they could afford to make another one.
While Steve did eventually max out ten different credit cards, today he’s a hugely popular musician with a successful label and lifestyle brand. As the Aokis show us, sometimes you have more resources at your disposal than you may think.
Sometimes debt is impossible to avoid, so don’t let it get in the way of your vision. When you start turning a profit, you might be tempted to put it back into your business, or simply to enjoy it. But the smartest thing to do is to pay off your debts so that interest rates don’t eat away at your earnings and your accounts can start looking healthy and prosperous.
Far too many businesses have gone under because of debt that got out of hand, so don’t be one of them. So far, we’ve seen how the Power of Broke can be applied to give hungry and focused entrepreneurs a leg up in the business world. But these same principles can be used by the major players as well.
After all, most big corporations started out as small businesses, and they should all continue to use the same strategies that got them to where they are today. Yet, when companies get rich, they tend to start throwing money at problems rather than coming up with creative solutions.
Take marketing, for instance; you could easily throw away millions on ad campaigns and forget about using free or low-cost resources like social media.
One can only wonder why 38 percent of the current Fortune 500 companies don’t have an active Twitter account. Let’s look at a smart campaign from years ago, before the era of social media:
General Mills, a company with an enormous marketing budget, wanted to reintroduce its struggling Nature Valley granola bars. Even though they could have spent millions putting ads in every grocery store, they stayed tightly focused and targeted places with active young clients, such as ski resorts and outdoor gear shops. Since then, Nature Valley has gone on to be one of General Mills’ top-selling brands.
Coca-Cola has been around so long that you can be forgiven for thinking it’s always been a success. But like any other global brand, it had to start somewhere. It’s possible to pinpoint four different phases that you need to get through patiently before your brand can go global.
The first stage is the item, which is your product in its most basic form: no label, no marketing, nothing but a product that satisfies a need. So you might have a coffee maker that doesn’t even have a logo or name yet.
The second stage is the label, which is when you give your product a name that sets it apart and makes it memorable. This way, after customers see it for the first time, they’ll know to ask for it by name the next time they’re in the market.
The third stage is the brand, at which point you create a logo for better label recognition, as well as an identifiable style around your product. This stage accounts for the money spent on advertising and marketing, ensuring that people will seek out the product and will easily spot it on a crowded shelf.
The fourth and final stage is the lifestyle, which is when your brand has grown to the point that customers have come to expect a certain level of quality and experience. This is the stage at which a product can become a status symbol, as is the case with Nike, Apple and FUBU.
By leveraging the Power of Broke in each of these phases, companies have a greater chance of making it. As your product moves through these stages, you might encounter some sort of crisis, and this is when you’ll need to be patient.
As the Harvard Business Review confirms, businesses that survive recessions do so by cutting costs and continuing to invest in growth, which you might do by, say, increasing funding to your research and development department. This way, you’ll be prepared to launch when the inevitable upswing comes around.
The office supply chain Staples made it through the 2000 recession by shutting down underperforming stores, while increasing its overall workforce by ten percent. When the recession ended, Staples had actually become more profitable than it had been beforehand.
These days, remarkable technological advances are a seemingly everyday occurrence. It’s a great time for small businesses because it’s easier than ever for them to get the funding they need.
For starters, the cost of technology is extremely low. Every year, it gets cheaper and easier to maintain a website and store massive amounts of data online, which makes it less risky and costly to take potentially lucrative chances.
Other great tools for small businesses are crowdfunding sites like Kickstarter and Indiegogo, which allow entrepreneurs to raise money for their ideas while maintaining strict control.
Honey Flow is just one example of a crowdfunding success. The company posted a five-minute video to Indiegogo about their dream to start an innovative beekeeping and honey-extracting business. They had hoped to raise $70,000 to make it to the label phase, but ended up raising an astounding $12 million, becoming the most successful Indiegogo campaign ever.
Today, it’s easier than ever to turn creativity into success, even if you’re not particularly skilled. But one of the best paths to success is to come up with creative solutions for those who need help doing something. Michael Dell wasn’t a computer genius; on the contrary, he started Dell Computers with the goal of coming up with a computer that would be more user-friendly.
You don’t need to be a rich genius to become a successful entrepreneur. With the Power of Broke, all you need is some creativity to find the right idea, and a willingness to embrace change and overcome the challenges along the way.
With these traits in place, there’s nothing to lose – and no limit to your possibilities.
It doesn’t take a lot of money to launch a business. In fact, not having money forces budding entrepreneurs to rise to the challenge with creative and innovative solutions that otherwise may not have occurred to them. There will always be challenges in the business world, but you can use the Power of Broke to stay prepared for anything that might come your way. Stay determined when the chips are down and be focused, you will succeed. Keep that faith.
Check out my related post: How to fail at everything and still win big?